This is by far the most interesting thing I've seen
this year. It finally explains the black magic behind
our banking system which almost no one understands.
If you want to understand the world we live in and
who pulls the strings and why, you'd better take a
look! Also will show you how scary this whole
subprime mess really is. Until we all watch this
video we won't be able to fix the problems of the
world.

Good compendium of countries that are dumping the
dollar. Unfortunately this is only the first salvo.

Excerpt:

The foreign exchange markets are not solely
about exchange rates. They are about values, smooth
flowing of international trade, about trust and
reliability. The sight of the $ falling over a long
period of time, with bounces and recoveries that
don't change the downward trend is far more than
simply a drop in value!The $ is steadily weakening,
but more than a drop in the $' international value
is happening here. The loss of confidence is in the
$ is accelerating each time it slips one or more
percent on a persistent basis, with small short
recoveries being seen in the midst of this decline.
How important is this loss of confidence? Critical
for it precedes policies, which long-term will
lessen the role of the $ to one of the world's top
5 currencies.Growing surplus holders don't want to
dump the $ for fear of losing value in the
remaining ones in their portfolio, but don't think
that a dumping of the $ is what it will take to
remove it from the position of principal global
currency. All realize that it is the knowledge of
the declining value of the $ that will bring on a
major toppling of that currency. So it is a choice
of a steady ‘controlled' fall or a steep decline to
disaster. To get perspective on the global scene
what is the thinking out there?

I hate to be the bearer of bad news, but the
subprime flood—which has been declared contained
over and over again—isn't contained yet. Newsweek's
Daniel McGinn ably explains why the rate freeze is
far from a panacea for all subprime borrowers. And
a flood of new data indicate that the subprime woes
may be a symptom—rather than a cause—of a broader
economic malady. That awful smell in Midtown isn't
from the horse-drawn carriages carrying tourists
around. It's the distinctive odor of debt going
bad.

I see it going down like this:

1 ) Massive mortgage defaults and attempt by the
government to stanch the bleeding by printing more
money
2 ) More devaluation of the dollar and the cascade
from mortgage defaults to credit card defaults
3 ) Recession - 40% drop in home prices and another
25% drop in value of dollar
4 ) OPEC countries and china drop pegs to dollar,
dollar drops another 30-40%
4 ) I move in with euros and buy a house on the beach
in southern california for 100k euros

Okay, maybe it'll be a bit more than 100k euros, but
not too much more .

...Not to say they want to. It wouldn't do
them much good. But it should be common by knowledge
by now that they easily could. This article
is the most comprehensive I've read on the topic.

Excerpt:

China has several economic “weapons” at its
disposal for countering the US, ranging from the
manipulation of its currency to the diversification
of its burgeoning stock of forex reserves. It also
has several less blunt options to choose from, such
as enabling Chinese companies to compete more
directly and effectively with US companies, and
opposing the US in securing a domestic energy
supply. On all of these fronts, the US is
essentially being held hostage, since it has become
so dependent on China as the world’s factory.
Ultimately, it seems unlikely that China will
deliberately butt heads with the US unless it is
first provoked, but America should nonetheless be
on its guard, since its economy hangs in the
balance.

If the US is lucky this may be the peak of
foreclosures due to the subprime mess, but it will be
years before the fallout from it is over.

Excerpt:

Foreclosure filings across the U.S. nearly
doubled last month compared with September 2006, as
financially strapped homeowners already behind on
mortgage payments defaulted on their loans or came
closer to losing their homes to foreclosure, a real
estate information company said Thursday. A total
of 223,538 foreclosure filings were reported in
September, up from 112,210 in the same month a year
ago, according to Irvine-based RealtyTrac Inc.

A good read about why corrupt nations are unable to
prosper regardless of the amount of aid they get. I
wonder how much "intangible wealth" the US has lost
in the last 7 years? I like to see numbers being put
on these concepts, because I agree that they are by
far the most important factors in any country's
prosperity.

Excerpt:

A Mexican migrant to the U.S. is five times more
productive than one who stays home. Why is that?The
answer is not the obvious one: This country has
more machinery or tools or natural resources.
Instead, according to some remarkable but largely
ignored research—by the World Bank, of all
places—it is because the average American has
access to over $418,000 in intangible wealth, while
the stay-at-home Mexican's intangible wealth is
just $34,000. Intangible wealth are things like the
trust among people in a society, an efficient
judicial system, clear property rights and
effective government. All this intangible capital
also boosts the productivity of labor and results
in higher total wealth. In fact, the World Bank
finds, "Human capital and the value of institutions
(as measured by rule of law) constitute the largest
share of wealth in virtually all countries."

Shares in one of Britain's largest lenders
tumbled another 30 percent Monday as customers,
driven by fears of insolvency, made run on the bank
and withdrew billions.

Northern Rock's problems came against the
background of signs of cooling in Britain's booming
housing market.In an interview published Monday in
The Daily Telegraph, former U.S. Federal Reserve
Board chairman Alan Greenspan warned that Britain
was susceptible to some of the problems now roiling
the U.S. real estate market. "Britain is more
exposed than we are in the sense that you have a
good deal more adjustable-rate mortgages," he
said.

I've long been very skeptical about the way the GDP
and CPI numbers are calculated. More reason to
believe it.

Excerpt:

Since 2004 I have written a number of articles
pointing out that offshoring is really labor
arbitrage and that if offshoring had the mutual
economic benefits associated with free trade, there
would be US employment growth in export and
import-competitive industries. Instead, employment
in these industries has declined in the US but
grown remarkably in Asia. In the 21st century the
US economy has been able to create net new jobs
only in nontradable domestic services, such as
waitresses and bartenders and health and social
services. Moreover, the growth in productivity and
GDP attributed to the US economy were inconsistent
with the stagnant real incomes of Americans.
Somehow productivity and GDP were growing strongly,
but it wasn’t showing up in the incomes of
Americans.

Business Week’s June 18 cover story by MIchael
Mandel explains the problem identified by Houseman.
Economist Matthew J. Slaughter, a proponent of
offshoring, says: “There are potentially big
implications. I worry about how pervasive this is.”
Business Week says the implications are big. The
cover story estimates that 40% of the gain in US
manufacturing output since 2003 is phantom GDP.

The days of the dollar as the world's “reserve
currency” may be drawing to a close. In August,
foreign central banks and governments dumped a
whopping 3.8% of their holdings of US debt. Rising
unemployment and the ongoing housing slump have
triggered fears of a recession sending wary foreign
investors running for the exits. China, Japan and
Taiwan have been leading the sell off which has
caused the steepest decline since 1992.

I did mention I sold all my stocks and took the
dollars and moved them into Czech crowns last month.
I would recommend anyone else to do the same. I wish
I had done it 7 years ago. I would have more than
doubled my money.

Excerpt:

Speculators, investors, and central bankers have
figured out that the US government and the Bernanke
Fed will not protect the dollar - not when millions
of Americans are having trouble making their
mortgage payments. The US money supply is
increasing - nearly five times faster than GDP
growth. And now, fearing a Japan-style deflation,
the Fed is likely to cut rates later this month.The
Chinese have one of the largest dollar piles in the
world.“Is China quietly dumping US Treasuries?”
asks Ambrose Evans-Pritchard in the English
press.“A sharp drop in foreign holdings of US
Treasury bonds over the last five weeks has raised
concerns that China is quietly withdrawing its
funds from the United States, leaving the dollar
increasingly vulnerable.”

Wow, revelation. When you take out oil and housing
prices from the Consumer Price Index it looks pretty
good. Magic! Put them back in, not so much so.

Excerpt:

"In 1983, the Bureau of Labor Statistics [BLS]
was faced with an awkward dilemma. If it continued
to include the cost of housing in the Consumer
Price Index, the CPI would reflect an inflation
rate of 15%, thereby making the country's economy
look like a banana republic. Worse, since investors
and bond traders have historically demanded a 2%
real return after inflation, that would mean that
bond and money market yields could climb as high as
17%."Yikes! What to do, what to do, what to do
whattodowhattodo? "The BLS's solution was as simple
as it was shocking: exclude the cost of housing as
a component in the CPI, and substitute a so-called
'Owner Equivalent Rent' component based on what a
homeowner might 'rent' his house for." Hahaha! The
government resorts to lying! "Wow! Why didn't we
think of this before?" they are heard to ask among
themselves. Fortunately for the government, it
worked. "The result of this statistical sleight of
hand was immediate and gratifying," Mr Hardaway
writes, "for the reported inflation index quickly
dropped to 2%"

Well, a few days ago, someone bet about $1.8 billion
that the broad market indeces would go down 30%
before september 21. Now a second big fish has jumped
in the pond and plonked down $4.5 billion on exactly
the same thing. I'm happy I sold all my stocks a
month ago, and I'm worried about why people are doing
this. They are very similar to the Bin Laden trades
that happened before 9/11. I don't like to sound
paranoid, but if something does happen, I want it on
my web site first.

A good and quick summary of what the fed doesn't do
to help the average person.

Excerpt:

Besides having created the mortgage-liquidity
nightmare, Greenspan and the Fed can also chalk up
another accomplishment: inflation. Inflation is so
serious that it has more than wiped out any income
gains coming to the majority of families in the
past seven years.The New York Times reports that
"Americans earned a smaller average income in 2005
than in 2000, the fifth consecutive year that they
had to make ends meet with less money than at the
peak of the last economic expansion, new government
data shows. While incomes have been on the rise
since 2002, the average income in 2005 was $55,238,
still nearly 1 percent less than the $55,714 in
2000, after adjusting for inflation, analysis of
new tax statistics show."

M1 — Measure of the U.S. money stock that consists of
currency held by the public, travelers checks, demand
deposits and other checkable deposits including NOW
(negotiable order of withdrawal) and ATS (automatic
transfer service) account balances and share draft
account balances at credit unions.

M2 — Measure of the U.S. money stock that consists of
M1, certain overnight repurchase agreements and
certain overnight Eurodollars, savings deposits
(including money market deposit accounts), time
deposits in amounts of less than $100,000 and
balances in money market mutual funds (other than
those restricted to institutional investors).

M3 — Measure of the U.S. money stock that consists of
M2, time deposits of $100,000 or more at all
depository institutions, term repurchase agreements
in amounts of $100,000 or more, certain term
Eurodollars and balances in money market mutual funds
restricted to institutional investors.

The immediate triggers are being described quite
well: the collapse of the U.S. subprime mortgage
market; the vulnerability of the rest of the economy
to the subprime undertow, due to the “efficiency” of
the markets in spreading risk; the worldwide
overextension of cheap credit; the failure of large
institutional investors and Wall Street brokerages to
behave responsibly; and the long-term effects of the
U.S. trade and fiscal deficits which are now coming
home to roost.

Amazingly, some commentators have been asking “if the
monetary crisis will affect the producing economy,”
and whether a recession lies ahead. In reality, the
U.S. producing economy has been in a recession for
the last year. This is shown most clearly by the
decline in M1, the portion of the money supply
immediately available to people for making purchases.